The Quick Read: Yes, it can be done, but thin credit does not make it automatic. VA sets no minimum credit score, and the program reaches 100% of the appraised value, including the financed funding fee. The file still goes through full underwriting, and the lender’s own rules decide where the loan lands. Pricing and available terms vary by lender, borrower profile, property type, and full underwriting review.
What does “full value” actually mean?
Full value means the new loan, including the financed funding fee, can reach 100% of the home’s appraised value. The VA appraisal sets that value, which VA calls “reasonable value.” Your Zestimate, your tax value and your own opinion do not set it.
The ceiling is federal rule. 38 CFR § 36.4306 caps the new loan at 100% of reasonable value and requires the lender to give the borrower a net tangible benefit test. The old 90% cap is gone, though the 90% figure survives as one of the ways to pass that benefit test.
Two things follow:
- A low appraisal shrinks the ceiling no matter how good your credit is.
- The funding fee and closing costs come out of the same ceiling. A fee that would push the loan over 100% has to be paid in cash.
So “full value” is the top of the range, not the amount you walk away with.
Does VA set a minimum credit score?
No. VA does not set one. The VA Lenders Handbook credit underwriting chapter says so directly and puts the emphasis on overall payment patterns, not on a single lapse.
Lenders are a different story. The wholesale programs Lendmire places VA files with start at a 580 decision score. Some lenders in the wider market set higher floors, and some tighten them further when the loan is near 100%. That gap between VA’s rule and a lender’s overlay is where thin-credit files get stuck. A veteran can meet every VA standard and still be declined by one lender and approved by another.
What counts as “thin” credit?
Thin credit is three different problems, and lenders treat them differently.
| Problem | What it looks like | How a file handles it |
|---|---|---|
| Low score | Plenty of history, but late payments or high balances | Score floor and the pattern of recent payments |
| Short history | Few or no tradelines | Nontraditional payment records |
| Recent derogatory items | Collections, a past bankruptcy or foreclosure | Explanation, seasoning and residual income |
Short history is the most workable. The VA handbook says that when a borrower has not yet built credit, has routinely used cash, or has not used credit since a disruptive event, the decision can rest on verifiable alternative payment records. Think of 12 to 24 months of rent, utilities and similar recurring bills. VA’s own conference training material points the same way, noting that lack of credit is not viewed as a negative. That deck is marked for VA internal use, so treat it as background, not a promise.
A low score is harder, because the lender’s floor is the gate. Recent derogatory items are hardest. Non-medical collections count as open, recent credit, and unpaid ones go into the debt-to-income and residual income analysis.
What does the lender actually test?
Full underwriting is required on a VA cash-out. A streamline does not work this way. The VA Pamphlet 26-7 chapter on the loan and guaranty lists what the veteran must show: satisfactory credit, stable income, residual income under VA’s regional tables, and an acceptable debt-to-income ratio.
Here is how that plays out in a file:
- Residual income is the controlling test. It is what is left each month after the loan payment, taxes, debts and living costs. VA measures it against a table.
- The 41% debt-to-income figure is a guideline, not a cap. A ratio above it needs residual income well above the table.
- Credit report and 24-month housing history. The lender verifies the mortgage or rent record.
- Certificate of Eligibility. The COE from VA decides eligibility. Service requirements are VA’s rules.
- Occupancy. VA states the borrower must live in the home being refinanced. A rental or second home does not qualify.
For the program overview, see Lendmire’s VA cash-out refinance program page.
Which compensating factors offset a weak file?
Residual income does the most work. The VA conference material names the others: significant liquid assets, a low debt-to-income ratio, long-term employment and minimal payment shock.
| Factor | How it helps | What the lender looks for |
|---|---|---|
| High residual income | Shows the budget survives the new payment | Well above the regional table |
| Liquid reserves | Cushion against a missed month | Documented, seasoned funds |
| Low debt-to-income | Less strain on income | Ratio under the 41% guideline |
| Job stability | Predictable income | Long tenure in the same field |
| Small payment change | Shows you can carry the new loan | New payment close to the old one |
One catch. Equity in the home does not count as reserves, and cash-out proceeds cannot be counted as reserves on the same file. Reserves have to come from your own funds.
Three borrower profiles, no dollar figures
These are illustrations. Real files depend on the lender and the full review.
Strong equity, low score. A veteran has owned for years and has large equity. Scores sit near the floor after a medical-collection cleanup. The score is the gate. If it clears the lender’s floor, residual income and a clean 12-month payment record carry the file. If it does not, the answer is a different lender or more time.
Thin file, stable income. A veteran paid cash for cars and avoids cards. No tradelines. The file leans on documented rent-or-mortgage history and utility records. The question is whether the lender will process nontraditional credit. Many wholesale programs will. Some retail desks will not.
Recent late payments, high ratio. A veteran missed payments within the last year and sits above the 41% guideline. Even with equity, this file needs residual income well above the table and a written explanation. Waiting and re-applying after a clean stretch often beats applying now.
Why a lender may fund less than 100%
The program allows 100%. Lenders choose what they will fund. A lender may cap the loan below the ceiling when credit is weak or reserves are thin, and that cap is policy, not a VA rule. Cash-out refinances are also sorted into types depending on how the new loan compares with the payoff, and some lenders apply different limits to each.
So a thin-credit veteran may get approved at a lower loan amount than the ceiling allows. That means less cash out. It does not mean a decline.
Costs, funding fee and break-even
The VA funding fee on a cash-out refinance is 2.15% for first use and 3.3% for subsequent use. It is waived for veterans receiving compensation for a service-connected disability and for the other exempt groups. It can be financed, as long as the total stays inside the 100% ceiling. 38 CFR § 36.4306 as published in the CFR says any portion that would exceed 100% must be paid in cash.
A cash-out is a full refinance. The rate, term and payment all reset, and the balance grows by the cash taken, the financed fee and any financed costs. Run the break-even on whether the change is worth it before you commit.
Net tangible benefit. The lender has to show the loan helps you. The test lists several ways to pass, including a shorter term, a move from an adjustable to a fixed rate, removing monthly mortgage insurance, or a new loan at or below 90% of reasonable value. A full-value loan passes through one of the other routes.
Risks of borrowing at the ceiling
- No equity cushion. If values dip, you can owe more than the home is worth.
- A bigger balance. The payment and total interest both rise.
- Appraisal risk. A low value cuts the loan amount.
- Seasoning. On a VA-to-VA refinance, seasoning applies: the later of 210 days from the first payment and the 6th payment. A net tangible benefit is also required.
Equity preservation is not a VA requirement. VA treated 10% equity retention as one benefit among many in its rule replacing the 90% cap. It is a risk choice you make, not a rule.
Self-check before you apply
1. Do you have the COE? Without it, nothing else matters.
2. Is the home your residence? It has to be.
3. Is your score at or above the lender’s floor? The wholesale programs here set score minimums that vary by scenario, and each lender sets its own.
4. Can you document 12 to 24 months of on-time payments? Rent, a mortgage or alternative records.
5. Is your residual income clearly above the table? This is the file’s biggest lever.
6. Do you have your own funds in reserve?
If most answers are yes, apply. If the score or recent payments are the weak spot, improve the file first. If the home is a rental, this is the wrong tool.
How to shop with a thin file
Ask each lender the same four questions: What is your minimum decision score? Do you accept nontraditional credit? What is your maximum loan-to-value on a cash-out with my credit profile? Do you manually underwrite? A mortgage broker can put one file in front of several wholesale lenders, which limits repeated credit pulls. Lendmire arranges these loans but does not lend.
If full value is out of reach
- A smaller cash-out at the amount the lender will fund.
- An IRRRL, if you already have a VA loan. It generally needs no appraisal or credit underwriting, and it offers no cash out. The funding fee is 0.5% unless exempt.
- Waiting. A few clean months can move a score and reduce recent-derogatory friction.
Key Terms Defined
Reasonable value: VA’s term for the appraised value of the home.
Residual income: The money left each month after the new payment, debts, taxes and living costs.
Net tangible benefit: A test showing the refinance actually helps the borrower.
COE: The Certificate of Eligibility from VA that confirms your entitlement.
Seasoning: The required waiting period before a VA-to-VA refinance.
Frequently Asked Questions
Does VA require a 620 credit score?
No. VA sets no minimum score. A 620 or 580 figure is a lender rule. The wholesale programs Lendmire works with start at a 580 decision score, and lenders may set their own. Every figure here varies by lender and program, and guidelines, property type, leverage, and credit profile all apply.
Can I qualify with no credit history at all?
Often, yes. The VA handbook directs lenders to consider verifiable nontraditional records, such as rent and utilities. Lenders vary in how much of that documentation they will process.
Will a low appraisal change my loan amount?
Yes. The 100% ceiling is measured against the VA appraisal, so a lower value means a lower maximum loan, whatever your credit looks like.
Can I get the full 100% and also finance the funding fee?
Yes, if the total stays at or below 100% of the appraised value. The fee can be financed into the loan, and any amount above the ceiling is paid in cash.
Is a streamline the same as a cash-out?
No. A streamline refinances an existing VA loan, with no VA appraisal and no cash out. A cash-out needs appraisal and full underwriting.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches. Program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s VA loan programs page.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
2. VA Pamphlet 26-7, Chapter 4: Credit Underwriting
3. VA Pamphlet 26-7, Chapter 3: The VA Loan and Guaranty
4. VA.gov: Cash-out refinance loan
6. Federal Register: VA cash-out refinance interim final rule
This article is part of Lendmire’s VA Loans series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: Can a Veteran Do a VA Cash-Out Within the First Year? · How to Shop VA Cash-Out Lenders by Credit Floor and LTV Overlay · How to Respond When a VA Cash-Out Appraisal Comes in Low
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.